Chinese Manufacturing Likely Aim Of Hawker Beechcraft Deal

Hawker Beechcraft looks likely to become the next Western company that will have business jets made in China.

But unlike Cessna and Embraer, which have announced Chinese assembly programs for business jets this year, the complete civil operations of Hawker Beechcraft will belong to a Chinese company if a proposed deal goes through. There is little doubt that local production of business jets has been a Chinese objective.

Hawker Beechcraft says it is negotiating “a strategic combination” exclusively with Superior Aviation Beijing, which proposes to pay $1.79 billion for the bankrupt U.S. aircraft builder, without taking over its defense business. The buyer is 40% owned by the Beijing city government.

Superior Aviation is already involved in general aviation (GA) manufacturing in China, developing an unmanned helicopter based on the U.S. Brantly B-2B. The company also owns Superior Air Parts in the U.S.

Although the firm is 60% privately held, the involvement of the Beijing government and the considerable sale price point clearly to a strategic economic move by an arm of the Chinese state.

In its announcement, the U.S. company stressed that Superior Aviation would keep production in Wichita and Little Rock, Ark. Hawker Beechcraft notes that its domestic and international operations will “continue to operate uninterrupted, led by the current management team.” The company also states that it will invest capital into the existing product lines, and “Superior is committed to maintaining Hawker Beechcraft’s strong presence in the U.S.”

But clearly, Beijing wants to join a recent craze among Chinese municipalities for building aircraft, especially for GA. To industry executives in China watching the proposed sale with interest, there is no doubt that a finalized deal in the long term would result in complete aircraft rolling out of factory doors within the city limits of Beijing — just as late next year Embraer 600s and 650s should begin emerging from a plant in Harbin and Cessna Citation Sovereigns from one in Chengdu.

One executive, who has closely studied the relative economics of Western and Chinese business jet manufacturing, sees no pressing economic reason to shift Hawker Beechcraft production, at least in the short term. “You don’t necessarily get lower costs, especially in the beginning” by moving production to China, he says.

Accepting, however, that Beijing must want local production, the rational move would be first to make components in the city, the executive says. Yet that would not be enough, he is quick to add: “The Chinese side will want to start with assembly, for face.”

When Beijing assembly of a Hawker Beechcraft model might begin is another issue. Since the sprawling state aeronautics group Avic so far seems not to be involved in the deal — another important point — the great bulk of aircraft-building expertise in the combined company will remain with Hawker Beechcraft’s managers.

Getting Chinese managers and skilled workers for local manufacturing will be one challenge — which could be alleviated by bringing Avic into the deal, as another Chinese GA manufacturing aspirant, Chengdu Helicopter, hopes to do.

Another challenge will be getting together the facilities and infrastructure in China, says another executive with experience in doing just that. “There are many elements,” that person says. “You need the plant, all its equipment, the workforce, the training. And what about a runway? Where can the facility be located? Beijing’s air traffic is so congested. Will the air traffic authorities cooperate?”

If land is needed for development, the Chinese city government can provide it. There are small airfields in rural areas attached to Beijing, and a new major airport is planned for the south of the city.

Perhaps a bigger issue will be getting FAA certification for manufacturing in China, something that Cessna, too, must be facing as it seeks to finalize its deal in Chengdu.

The potential for business aviation in China was discussed for many years, with many years of disappointment. Then late last decade, sales to Chinese customers finally began rising quickly, partly in response to relaxed restrictions on the use of private aircraft. Hard on the heels of that, the air force, which largely controls China’s skies, accepted that low-altitude airspace could be opened progressively for private use, making helicopters and small private airplanes more attractive.

China likes to make what it uses, so the result has been a surge of interest in building GA aircraft, including business jets and helicopters. Tianjin had already shown how a city that had been an aerospace nobody could muscle its way into the industry. It now assembles helicopters and Airbuses, and will soon be turning out big space launchers. Zhuhai has since snagged the headquarters of Avic’s general aviation subsidiary, Caiga, while Chongqing is backing ambitious Chongqing Helicopter. Now Beijing, which has no major aircraft-making facilities despite being the national capital, is moving to take control of an important Western manufacturer.

Eventual Avic involvement in Hawker Beechcraft, especially through Caiga, cannot be ruled out. Caiga has been charged with making business aircraft of the size range that Hawker Beechcraft produces. And Avic is keen to get municipal funding for its new facilities, so Beijing’s money is a lure.

Still, Superior Aviation Beijing and its backers could go it alone. There is no rule in China that says only Avic can make aircraft.